A purchase order is a contractually binding document between a buying organization and a selling organization. It contains information pertaining to goods and/or services that a buying organization commits to buy, where the information can include, for example, an item, a description of a service, a quantity, and a price.
A “legal entity” is an association, corporation, partnership, proprietorship, trust, individual, or other type of entity that has legal standing in the eyes of the law. A “legal entity” has a legal capacity to enter into agreements or contracts, assume obligations, incur and pay debts, sue and be sued in its own right, and be held responsible for its actions. A purchase order is a financial and legal contract between a buyer and a seller. A “sold-to legal entity” on a purchase order represents a buying entity associated with the purchase order who assumes any obligations originating from the purchase order, and who incurs and pays debts originating from the purchase order.
Procurement requirements around supplier management, and catalog management, are typically uniform across multiple lines of businesses within a certain geography, but requirements regarding assignment of the sold-to legal entity on a purchase order can vary from being a simple scenario to a highly complicated situation that involve buy/sell transactions in multiple subsidiaries before the purchase is expensed to the legal entity of the requesting department.